Environmental-Technology Gap and Technical efficiency Estimates of Farm households in Northern Ethiopia: Metafrontier Analysis

Agriculture is the driving force of the economy in less developed countries like Ethiopia. Consequently, Agricultural productivity demonstrate crucial role for improving the welfare of the vast majority of poor (Sahn et al,. 1997; World bank, 2000) countries. Farm productions in Tigray region (northern Ethiopia) operated in spatially diverse physical environments that are largely beyond the control of farmers. Following the rejection of the null hypothesis that stated there is hemogenious technology across the three geographic locations, this study decompose total factor productivity into technical efficiency and production environment (technology gap) effects among the three groups using stochastic metafrontier analysis. In this study it is found low mean technical efficiency scores 32.2%, 63.8% and 48.5% for Raya Azebo, Qolla Temben and Saesie Tsaeda Emba districts respectively. Moreover, the mean technical efficiencies relative to their respective metafrontier are far lower than technical efficiency relative the group frontiers implying that there is significant technological gap ratio (TGR). The values of mean TGR scores for the three groups are 54.2%, 57.1% and 21% respectively. The existence of low technical efficiency indicates there is a potential to increase output without increasing inputs applied for agriculture if efficiency problems are solved aptly. Socioeconomic, demographic and farm level factors are found correlated with technical inefficiency of farm households in the area. Some are access to extension service, crop diversification, age of the household head etc.